Washington Insider -- Thursday

NAFTA Talks Looming

Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.

New US-Mexico Sugar Suspension Agreement Deal Possible

Mexico and the U.S. could reach a deal in the next two weeks on sugar exports to the U.S. market, Mexico Economy Minister Ildefonso Guajardo said earlier this week at a news conference in Puerto Vallarta.

Guajardo met with U.S. Commerce Secretary Wilbur Ross in Washington on May 15 and discussed how to replace a current sugar suspension agreement that limits the amount of sugar Mexico may export.

Guajardo said the two sides will be moving forward and will meet a June 5 deadline to come to agreement. “We are advancing in the process,” Guajardo said, according to a tape provided by the Economy Ministry. “We believe that if we continue on the same path, we should be able to come to an agreement that would help us to close the differences on the talks in the next two weeks.”

Guajardo said he will be meeting with U.S. Trade Representative Robert Lighthizer today in Vietnam.

Meanwhile, other trade-related meetings are ahead. Mexico Foreign Minister Luis Videgaray will travel to Washington today with Finance Minister Jose Antonio Meade and Interior Minister Miguel Angel Osorio Chong to meet with their U.S. counterparts, Videgaray said. They plan to continue discussions on trade, security and immigration, he said.

Crop Insurance Indemnities for 2016 at Low Levels

Crop insurance indemnities for the 2016 crop year totaled only $3.653 billion, substantially under the $6.306 billion level for 2015 crops and at a loss ratio of .39 compared to .65 for 2015, according to Risk Management Agency (RMA) data.

No major program crop registered indemnities of $1 billion or more for 2016 crops, a marked shift from 2015 when corn, soybean and wheat indemnities all were $1 billion or more. Corn just missed the mark for 2016 at $944 million.

Loss ratios (premiums paid versus indemnities) is also at an historical low at .39, the lowest loss ratio for program as a whole based on data going back to 1989.

The crop insurance program will still be under pressure in the coming farm bill debate – the premium subsidy in particular. But that premium subsidy for 2016 crops was also lower than 2015. Still, program backers will need to have their arguments ready as the new farm bill debate moves forward.

Washington Insider NAFTA Talks Looming

Informa Economics reported this week that the upcoming NAFTA talks could be long and complicated, according to Commerce Secretary Wilbur Ross and that pressures are building on participants. For example, Senate Finance Chairman Orrin Hatch, R-Utah, said that that he wants the Trump administration to send Congress a letter quickly notifying its intention to renegotiate NAFTA.

"We're going to be working on that this week. We hope we can get most of that put to bed this week," Hatch said. "I'd like to start it as soon as we can. I'd like to trigger it." However, the President has yet to submit to Congress a final version of the letter, which would trigger a 90-day consultation period on renegotiation. Talks with Canada and Mexico can only begin after the 90 days is up.”

U.S. Commerce Secretary Wilbur Ross expects "long, complicated' NAFTA talks” and said he will not rule out bilateral deals Tuesday after meeting with Senate Finance Committee members. He noted, somewhat strangely, that “now it is a trilateral deal and we shall see what comes in the future; who knows the actual outcome will be,” he said.

Ross added that his remarks did not mean it would be impossible to finish the talks before the end of the year, which officials have said is the “preferred timeline” because of 2018 elections in the U.S. and Mexico.

Earlier this week, Ross and the newly installed U.S. Trade Representative (USTR) Robert Lighthizer made a final round of consultations. These were expected to lead to the preparation of the 90-day notice of the administration’s intention to renegotiate the 23-year-old free trade deal, as required under the 2015 trade promotion authority law. Administration officials hope the deal remains a trilateral agreement, Hatch said, adding that “a lot depends on negotiations.” He did not elaborate on his comment.

In their travels on Capitol Hill, Lighthizer and Ross met with the House Ways and Means Committee as well as two special negotiating advisory groups in the House and Senate. These followed a Tuesday session with the Senate Finance Committee.

Sen. Claire McCaskill, D-Mo., said Lighthizer and Commerce Secretary Wilbur Ross outlined their top goals in the upcoming renegotiation of NAFTA. "They said they wanted to help manufacturing and not hurt the people who are benefiting from NAFTA," she said.

Several senators said they emphasized to the administration that protecting the agricultural industry and its current market access to Canada and Mexico were top priorities. "We don't want to see ag hurt, and NAFTA by and large has been good for agriculture," said Sen. John Thune, R-S.D., the chamber's number-three Republican. He noted there are already some "disruptions in the ag marketplace today because of uncertainty" about where the NAFTA renegotiation is headed.

Senator Thune’s comments reflected the new willingness of ag advocates to ratchet up their concerns about lack of clarity or progress on NAFTA. This was emphasized by the slow pace of administration decisions on nominations for the key trade officials, especially Secretary Perdue and USTR Lighthizer. In addition, there has been concern over the willingness of Secretary Ross to publicly advocate tough negotiating positions on agriculture that seem self-defeating to at least some observers. A third concern has been the low profile of trade concerns among the several high profile issues concerning health care, economic issues and others.

So, it will be important to watch how rapidly the administration moves forward on changes to NAFTA and how it prioritizes these and recognizes the importance of NAFTA markets to the US ag industry, Washington Insider believes.

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